The fund that is recommended by Person X (financial advisor) without knowing about the client’s risk. Introduction: Portfolio refers to a set of financial investments owned by an investor. The portfolio of investments includes debentures, stocks, bonds, and mutual funds. The average return that is incurred in excess of the risk-free rate per unit of the volatility is termed as Sharpe ratio . Its measure indicates the amount of excess return that an investor incurs for an additional volatility, which the investor endures for holding a risky asset. The efficient portfolio is a particular portfolio with the maximum Sharpe ratio in an economy.

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Chapter 11, Problem 36P

Summary Introduction

To discuss: The fund that is recommended by Person X (financial advisor) without knowing about the client’s risk.

Introduction:

Portfolio refers to a set of financial investments owned by an investor. The portfolio of investments includes debentures, stocks, bonds, and mutual funds.

The average return that is incurred in excess of the risk-free rate per unit of the volatility is termed as Sharpe ratio. Its measure indicates the amount of excess return that an investor incurs for an additional volatility, which the investor endures for holding a risky asset. The efficient portfolio is a particular portfolio with the maximum Sharpe ratio in an economy.

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